HARMEET SINGH SABLOK, MUMBAI V. ITO WD 19(2)(3), MUMBAI

ITA 1468/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101278 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S S PHADKAR
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Permanent establishment
• Section: 143(3); 133(6); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' SMC ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 1468/MUM/2015 (ASSESSMENT YEAR: 2008 - 09 ) SHRI HARMEET SINGH SABLOK VS. INCOME TAX OFFICER - 19(2)(3) A/24, QUEENS PARK PREMISES CHS LTD., JUHU , SANTACRUZ (W) MUMBAI 400049 PIRAMAL CHAMBERS LALBAUG, MUMBAI 400012 PAN - AIRPS3621D APPELLANT RESPONDENT APPELLANT BY: SHRI S.S. PHADKAR RESPONDENT BY: SHRI JEEVAN LAL LAVIDIYA DATE OF HEARING: 29.09.2015 DATE OF PRONOUNCEMENT: 12 . 10 .2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) - 32, MUMBAI AND IT PERTAINS TO A.Y. 2008 - 09. 2. ADDITION OF ` 8,54,962/ - IS SUBJECT MATTER OF DISPUTE BEFORE THE TRIBUNAL. IT MAY BE NOTICED THAT THOUGH THE ASSESSEE CONTENDS THAT REOPENING OF ASSESSMENT IS BAD IN LAW NO SPECIFIC ARGUMENTS WERE ADVANCED IN TH IS REGARD EVEN AT THIS STAGE. 3. FACTS CONCERNING THE ISSUE IN DISPUTE ARE STATED AS UNDER. ACCORDING THE ASSESSEE HE WAS ENGAGED IN THE BUSINESS OF PUR CHASE AND SALE OF CARS. FOR THE YEAR UNDER CONSIDERATION HE DECLARED TOTAL INCOME OF ` 1,32,340/ - . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR A.Y. 2009 - 10 THE AO NOTICED UNEXPLAINED CASH DEPOSITS IN THE STANDARD CHARTERED BANK ACCOUNT OF THE ASSESSEE. SINCE THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCE OF THE CASH DEPOSIT IN THE BANK ACCOUNT , AN ADDITION OF ` 18,23,034/ - WAS MADE FOR A.Y. 2009 - 10. IN THE YEAR UNDER CONSIDERATION THERE WAS A CASH DEPOSIT OF ` 6,62,600/ - AND ITA NO. 1468/MUM/2015 SHRI HARMEET SINGH SABLOK 2 CHEQUE DEPOSIT OF ` 1,9 2,326/ - AGGREGATING TO ` 8,54,926/ - . WHEN THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE , IN THE PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147OF THE ACT , ASSESSEE SUBMITTED THAT HE HAS NO FIXED PLACE OF BUSINESS AND HE WAS OPERATING FORM THE OPPOSITE SIDE OF TAJ AUTO SILENCER, SANTACRUZ (W). IT WAS CONTENDED THAT GENERALLY COPIES OF TRANSFER FORMS FROM SELLERS OF CARS ARE OBTAINED AND HANDED OVER TO THE PURCHASERS OF CARS AND IN RETURN HE WOULD BE EARNING COMMISSION. SOMETIMES HE PAYS SALE PRICE TO THE SEL LER AND KEEPS THE REGISTRATION PAPERS WITH HIM AND HANDS IT OVER TO THE PURCHASER ON A LATER DATE AT THE TIME SALE. IT WAS ALSO CONTENDED THAT HE MAKES PAYMENT OF PURCHASE PRICE BY CHEQUE AND RECEIVES PAYMENT BY CASH, WHICH IS DEPOSITED. HE ALSO CONTENDED THAT HE HAS ONLY ONE CREDIT CARD OF CITI BANK THROUGH WHICH HE MAKES PAYMENTS FOR PURCHASE OF SPARE PARTS, ETC. HE ALSO ADMITTED THAT HE HAS NOT MAINTAINED ANY RECORD OF RECEIPT BY WAY OF CHEQUE OR CASH AND HENCE HE COULD NOT FURNISH DETA ILS OF CHEQUES DEP OSITED OF ` 1,92,326/ - IN STANDARD CHARTERED BANK. HE MAINLY CONTENDED THAT THE DEPOSITS IN CASH AND CHEQUE IN STANDARD CHARTERED BANK WERE MAINLY FROM HIS BUSINESS AS COMMISSION AGENT, I.E. IN DEALING IN CARS. 4. THE AO ISSUED NOTICE UNDER SECTION 133(6) OF T HE ACT TO THE STANDARD CHARTERED BANK TO OBTAIN THE DETAILS OF CASH DEPOSITS MADE IN THE BANK. AS ALREADY STATED HEREINABOVE , A SUM OF ` 6,62,600/ - WAS DEPOSITED IN CASH AND ANOTHER SUM OF ` 1,92,326/ - WAS DEPOSITED BY CHEQUE S WHEREAS THE ASSESSEE DID NOT DISCLOSE THIS BANK ACCOUNT AND WHEN THE SAME WAS PUT TO HIM HE AGREED THAT IT WAS HIS BANK ACCOUNT BUT HE TRIED TO TAKE ADVANTAGE OF PROVISIONS OF SECTION 44AF OF THE ACT. SINCE THE ASSESSEE DID NOT FURNISH DETAILS OF CHEQUE D EPOSIT AND CASH DEPOSIT, THE AO TREATED THE DEPOSITS AS INCOME OF THE ASSESSEE AND ADDED THE SAME UNDER SECTION 68 OF THE ACT. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT HE WAS ENGAGED IN PURCHASE AND SALE OF SECOND - HAND MOTOR CARS, SPARE PARTS ITA NO. 1468/MUM/2015 SHRI HARMEET SINGH SABLOK 3 A ND REPAIR OF SCOOTERS. HE ALSO SUBMITTED THAT HE WAS HAVING TWO BANK ACCOUNTS AND THE TOTAL DEPOSITS THEREIN WORKS OUT TO ` 12,17,189/ - OUT OF WHICH THE ASSESSEE DISCLOSED INCOME OF ` 1,41,757/ - . IN OTHER WORDS, THE INCOME DECLARED WORKS OUT TO 11.61% OF THE TOTAL RECEIPT, WHICH IS MORE THAN 8% RETURN ON GROSS RECEIPTS, IF PROVISIONS OF SECTION S 44AF/44AD ARE APP LIED. HE THUS CONTENDED THAT THE ADDITION OF THE ENTIRE AMOUNT IS NOT IN ACCORDANCE WITH LAW. THE LEARNED CIT(A) WAS OF THE OPINION THAT THE ASSESSEE S EXPLANATION IS NOT CONVINCING. HE THEREFORE CONFIRMED THE ADDITION MADE BY THE AO , THOUGH UNDER SECTION 69A OF THE ACT , BY OBSERVING AS UNDER: - I, HOWEVER FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND N. G AND H I 141 ITR 67 HA S HELD THAT THE PASS BOOKS IS MAINTAINED BY THE BANK, NEITHER AS AN AGENT OF THE CONSTITUENT, NOR UNDER THE INSTRUCTIONS OF THE CONSTITUENT, HENCE THE PASSBOOK CANNOT BE REGARDED AS BOOK MAINTAINED BY THE ASSESSEE. I FIND THAT SINCE FOR ADDITION U/S 68, TH E UNEXPLAINED CREDIT SHOULD ESSENTIALLY BE FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AND IN PRESENT CASE, THE APPELLANT HAS NOT MAINTAINED THE BOOKS OF ACCOUNTS AT ALL, THE ADDITION MADE CANNOT BE CONFIRMED U/S 68 OF THE ACT. THIS HOWEVER DOES NOT EX ONERATE THE APPELLANT SCOT - FREE, SIMPLY BECAUSE THE QUOTED SECTION FOR ADDITION MADE IS NOT APPLICABLE, WHEN ALL OTHER FACTS OF THE CASE ARE AGAINST THE APPELLANT. I FIND THAT IN THE CASE OF ANUP SHARMA VS. ACIT (ITA NO. 161/CHD/2012 , THE HON'BLE ITAT, CHANDIGARH HAD DEALT WITH SIMILAR CASE, WHEREIN THE UNEXPLAINED CREDITS FOUND IN ASSESSEES PASS BOOK WERE CONFIRMED BY ASSESSING OFFICER U/S 68 OF THE ACT, HOWEVER, IN APPEAL BEFORE CIT(A), THE ASSESSEE RELIED UPON THE SAME JUDGMENT OF BHAICHAND N. G AND H I (SUPRA). HENCE, THE CIT(A), BY APPLYING PROVISIONS OF SECTION 292B, CONFIRMED THE SAID ADDITION S U/S 69A OF THE ACT. THE GROUND OF APPEAL BEFORE HON'BLE ITAT WAS THAT THE CIT(A) HAD GROSSLY ERRED IN TREATING THE ADDITION MADE U/S 68 AS UNEXPLAINED INVESTMENT U/S 69A BY APPLYING THE PROVISIONS OF SECTION 292B OF THE ACT. THE HON'BLE ITAT OBSERVED THAT ASSESSMENT EVEN IF MADE UNDER THE WRONG PROVISIO N IS PROTECTED BY THE PROVISION OF SECTION 292B . THE HON'BLE ITAT HELD THAT MERELY BECAUSE THE BANK PASS BOOK CANNOT BE TREATED AS BOOKS OF ACCOUNT ON THE BASIS OF CERTAIN DECISIONS DOES NOT MEAN THAT ADDITION IS NOT PROTECTED U/S 292B AND HAS BEEN RIGHTLY CONFIRMED BY THE CIT(A) U/S 69A OF THE ACT. I FIND THAT THE FACTS OF PRESENT CASE OF THE APPELLANT IS IDENTICAL, HENCE BY INVOKING THE PROVISIONS OF SECTION 292B, I CONFIRM THE ADDITION MADE OF RS.8,54,926/ - U/S 69A OF THE ACT. THEREFORE, THE GROUND NO. 2 OF THE APPEAL IS DISMISSED. 6. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS LINE OF ITA NO. 1468/MUM/2015 SHRI HARMEET SINGH SABLOK 4 BUSINESS OF PURCHASE AND SALE OF CARS ASSESSEE MERELY RECEIVES COMMISSION AND IF THE ENTIRE AMOUNT IS ADDED , THE TOTAL INCOME WORKS OUT TO MORE THAN 20% OF THE TURNOVER AND THEREFORE TH E ADDITION WOULD BE EXCESSIVE IN THE CIRCUMSTANCES OF THE CASE. HE, HOWEVER, ADMITTED THAT IN ASSESSEES OWN CASE FOR 2009 - 10 THE APPELLATE TRIBUNAL, UNDER IDENTICAL CIRCUMSTANCES, HELD THAT THE ADDITION HAS TO BE RESTRICTED TO 25% OF THE TOTAL DEPOSIT IN THE STANDARD CHARTERED BANK. HOWEVER, HE SUBMITTED THAT IF 25% IS ADDED AS INCOME , IN ADDITION TO THE INCOME ALREADY DECLARED , IT WORKS OUT TO ALMOST 50% OF THE AMOUNT DEPOSITED IN THE BANKS AND THUS IT IS EXCESSIVE. 7. ON THE OTHER HAND, THE LEARNED D.R. SUB MITTED THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND HE ADMITTED THAT HE ACTED MERELY AS A COMMISSION AGENT IN SOME CASES AND IN FEW CASES HE MUST HAVE PURCHASED THE CARS AND WITHOUT GETTING IT REGISTERED IN HIS NAME HE HAS TRANSFERRED THE CARS /SCOOTERS TO THIRD PARTIES AND THE MARGIN BETWEEN THE PURCHASE CONSIDERATION AND SALE CONSIDERATION WOULD BE THE INCOME OF THE ASSESSEE. IN THE ABSENCE OF MAINTENANCE OF BOOKS OF ACCOUNT IT IS DIFFICULT TO ESTIMATE AS TO WHAT IS THE TOTAL TURNOVER OF THE A SSESSEE AND THUS IT CANNOT BE SAID THAT THE ESTIMATE IS EXCESSIVE. ACCORDING TO HIM THE ENTIRE AMOUNT HAS TO BE ADDED UNDER SECTION 69 A OF THE ACT , AS HAS BEEN DONE BY THE CIT(A). IN THE ALTERNATIVE HE SUBMITTED THAT THE IT AT, IN ASSESSEES OWN CASE, HAVIN G CONFIRMED ADDITION OF 25% OF THE TOTAL DEPOSIT (ITA NO. 7580/MUM/2013 DATED 30.06.2015), T HE SAME METHOD CAN BE FOLLOWED IN THIS CASE ALSO. 8. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THOUGH THE ASSESSEE CLAIMS THAT HE WAS A SMALL TIME COMMISSION AGENT , NO DETAILS WERE FURNISHED WITH REGARD TO THE TOTAL TURNOVER OF THE ASSESSEE AND HENCE IT IS DIFFICULT TO ESTIMATE AS TO WHAT SHOULD BE HIS INCOME IN THE CIRCUMSTANCES OF THE CASE. IN FACT HE HAS NOT EVEN SHOWN THE BANK ACCOUNT MAINTAINED IN STANDARD ITA NO. 1468/MUM/2015 SHRI HARMEET SINGH SABLOK 5 CHARTERED BANK AND IT IS ONLY WHEN THE AO OBTAINED INFORMATION ABOUT THE DEPOSITS BEING MADE IN STANDARD CHARTERED BANK HE HAD N O OTHER ALTERNATIVE BUT TO ACCEPT THE FACT THAT THE ACCOUNT WAS MAINTAINED BY HIM. DURING THE COURSE OF HEARING THE ASSESSEE WAS ALSO ASKED TO INFORM AS TO WHAT ARE THE DEPOSITS AND WITHDRAWALS MADE BUT EVEN THAT STATEMENT WAS NOT FURNISHED. UNDER THESE CIRCUMSTANCES I HAVE NO OTHER ALTERNATIVE EXCEPT TO FOLLOW THE DECISION OF THE ITAT IN ASSESSEES ON CASE FOR SUBSEQUENT YEAR AND , CONSISTENT WITH THE VIEW TAKEN THEREIN , I HOLD THAT 25% OF THE TOTAL DEPOSIT MADE IN STANDARD CHARTERED BANK DESERVE S TO BE TREATED AS INCOME OF THE ASSESSEE. AO IS DIRECTED ACCORDINGLY. 9. IN THE RESULT, APPEAL FILE BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCTOBER , 2015. SD/ - (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 12 TH OCTOBER , 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 32 , MUMBAI 4. THE CIT 19 , MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI